What would your kids do if their Grandma or Grandad gave them $20 as a birthday present?
Today we tell you about a book written to help kids understand the importance and true value of money. Paul Clitheroe has said “Every child, teacher, parent and grandparents should read this book.” Find out why as we talk to the author – Effie Zahos.
Kevin: What happens when you give a child $20 as a Christmas gift? How do they go about spending it? Do you really concern yourself with that, or is this an opportunity for you to start to teach them some things about money and how best to use it?
I’m going to talk to Effie Zahos now. Effie is the editor of Money magazine and has written a great book that we told you about a little while ago called The Great $20 Adventure”
Good day, Effie. Thanks for joining us.
Effie: Thank you for having me.
Kevin: Paul Clitheroe has said that every child, teacher, parent, and grandparent should read this book. That is a great endorsement, isn’t it?
Effie: It is a great endorsement, and I’m very grateful for it. I’m hoping it’s coming from a place in the sense that we focus a lot on financial literacy for children when they are teenagers or maybe when they are young adults but very little is said or done when they are young. I’m talking in the age group of, say, two to ten years of age. That’s where our money habits are formed.
I guess it came about from a place whereby my own son would spend every cent he had on Skylanders. If you’re a mum and dad out there, I know you’ll know what they are, because they have been the most annoying toy to buy, I think. My son kept buying Skylanders with all of his birthday money, and it got to the stage where I walked past the toy room and I added up all of the little Skylanders he had. They’re about $10 a pop, and it was almost the size of a small deposit on a home. No exaggeration. It adds up.
Kevin: Incredible. In writing this book you made it a bit of an adventure for kids. Tell us how that came about, and where did the characters come from?
Effie: The characters actually came from people I’ve met through my life, and then I associated animals to them so that children can relate to them. But these are characters that your children will meet, and I’m sure you have met, as well, and they are the decisions we have with money.
A lot of kids think that all you can do with money is spend it, but I wanted to introduce some fun and excitement whereby a little boy, Max, does receive $20 from his grandma and he doesn’t know what to do with it other than spend it, and his mother says, “No. Hold it! Why don’t you take George” – that’s his little dog – “for a walk and have a think about what you should do with the gift that Grandmother has given you.”
He comes across these characters and, like I said, I’ve met a few of these. Donny Dangerous, I would say, is probably my favorite in the sense that I’ve met a few Donny Dangerouses in my life. Donny urges him to leave the $20 with him and he’ll double it, so if he comes back tomorrow he’ll have $40. Obviously, Donny Dangerous is a con man. Little George, Max’s dog, doesn’t like him, and Max says, “Well, no. I’ll think about this and I’ll keep walking and consider it.” So he goes along for the walk.
Eventually the party gets bigger and bigger because he comes across all of these other animals. You have Jack Flash, the most extravagant turkey you’ll ever see, and he is all about spending, spending, spending, spending, and he’s trying to convince him, “Well, you can spend the money.” Then you have Miss Penny Saver, the squirrel, who suggests, “You know, you should actually be saving.” And you have these beautiful illustrations. I met this woman who illustrates children’s books, and she really put the story to life with these characters.
There’s also a philanthropist, Mr. Givings, who says there are a lot of other people who need this money as opposed to just wanting it. We try to talk about the difference between needs and wants.
After each character he comes across, the parents do have a chance to chat. “Should he give his money to him or her? What would you do?” So it encourages conversation as well as making it quite exciting because, like I said, his walk gets bigger and bigger. There are more people joining him and he has to make this big decision with the pressure of everyone around him.
Kevin: Effie, is there any time when it’s too early to teach kids about money?
Effie: I don’t think so. I think that as soon as children can recognize numbers – so they can count to, say, 10 – it’s time to talk about money. I think it’s the exercise of just talking about it when it pops up naturally organically. When you’re out shopping and out and about, and you are handling cash, talk about it, that this is a price and this is what it’s worth, and do you want this, do you need this?
The sooner you start, the easier it is to them to form their money habits. Because if you don’t, children do really look upon what you’re doing. If you have a 10 year old who is bad with money, I always say, “Have a good look at yourself, because chances are that they have those habits from you.”
The difficult thing in this day and age, if I can say, is that we don’t handle enough cash. Everything is done virtually electronically, and there is your challenge.
Kevin: It’s interesting, Isn’t it, to think about the conversations around the kitchen table and how we influence our children at a very young age to give them their mindset about money. We have to think about our conversations about money and how we treat it because that’s going to be instilled in our kids.
Effie: It absolutely is. If there is tension at home because money is too tight or you’re in some financial woes, your children will pick that up. If you’re not tackling it, they will also grow up in a situation where they just bury their head in the sand, so to speak, when it comes to finances.
But if you’re open and honest with it and put a plan in place and discuss it, and what I mean by that… You must be thinking, “Would you do that with an eight-year-old?” I do. I do bring the electricity bill when it comes in and I show them, “Look, this is what we paid last quarter and this is what we paid this quarter,” and it’s because it’s winter and you’re probably using more of the heaters. “Remember to switch off lights or do things like that and we can bring the costs down.”
I do talk to my kids about the family bills because they need to be involved, too. They need to understand that you do earn an income, you have these expenses, and you can manage it and cut your costs down depending on your actions.
Kevin: That leads me to my next question, Effie. Is it realistic to get children to start saving for things that will really matter to them later in life, like buying a car or even buying a home? Or should their money goals be a little bit more short term do you think?
Effie: That’s a very private matter between the parents and the child. I’ve been on the money brand for almost 20 years and I have met children who will just shock you with the amount of savings they’ve had – 14 year olds who have got, say, $30,000 in their bank account and could buy a car, which is great. They’ve been working and they’ve been saving their pocket money. Credit to their parents who have done that.
Then I have other children who have no idea and have just been given everything because their parents have gotten busy, life passes by, and they’ve forgotten to pass on the money skills that you have. It’s really important that you do that.
I think it’s really important that kids do save. I am from the old school of opening an account and getting them to see their statements. I don’t care if it’s online or on paper, but get them to see what some savings does. Match their savings if you can afford that. So if they manage to save, say, $50 a month, you put an extra $50 in there. Give them an incentive to build those savings.
Any way that they can learn to save at a young age makes it so much easier later in life. Can you imagine turning 18 and all of a sudden, you have to put money away. It would be a foreign thing to you. Whereas if it’s a child who does put even $2 away… Get them excited about looking online. Go online and show them, “This is your bank account. You put $2 in last week and this is what’s happened.” You probably earn little interest unfortunately in this environment, but there are some good online saver accounts that are paying around 3% or 3.5%. The idea is really to get them into a regular habit.
Kevin: I’m talking to Effie Zahos who is the editor of Money magazine and also the author of a great book called The Great $20 Adventure, a great way to teach your kids about money. It’s available at all good bookstores.
Effie, could I just ask you this question and this is all about making gifts conditional, I guess, and for those of us who can give our kids or our grandkids $20 as a Christmas or a birthday present, should we have restrictions on how they spend that? Is that the best way to teach them?
Effie: That’s a good question. If you are giving someone a gift, do you think you should be able to control their spending? I think as a parent, you should actually give them some guidance, and this is what this book is all about. It’s about giving the child the knowledge and the power and the options that you don’t have to spend the whole $20. There are other options in what you can do with it.
I think as a parent it is your responsibility to at least highlight that you should put some money away for a rainy day because this can happen, or that’s nice that you can buy this right now but did you know you could get something bigger and better if you wait a couple more months to build on it?
Later on as their savings do grow, it’s also important to maybe get some help as a parent about what is the best name to put it in, because I do see some situations where kids’ savings do grow quite well and quite high and kids can pay a ridiculous amount of tax if it’s just in their name.
The government has done that because in the past parents have been hiding a lot of their own money in kids’ accounts. Do be careful as to how you set up your kids’ savings accounts especially when their balance gets quite big.
Kevin: Great advice. Remember it’s never too early to teach your kids about saving money.
Effie Zahos has been my guest. Effie is the editor of Money magazine. That book again, The Great $20 Adventure. It’s available at all good bookstores right now.
Effie, thank you so much and thank you for spending some time with us this morning to tell us about your new book.
Effie: A pleasure. Thank you. And if you want to get onto Magshop.com.au, you can get it online, as well.
Kevin: Excellent. Thanks, Effie. Talk to you again soon.
Effie: Thank you.